Benefits system locks in low earners, Oxfam says

Growing numbers of low-paid workers who receive social security to top up their incomes want to be self-reliant but the current benefits system deters them, a leading charity says.

Oxfam made the comments as it released results of a year-long study that found most low-income workers have been earning more since the minimum wage took effect last year.

Welfare recipients with jobs are allowed to earn up to HK$2,500 a month, and any wages in excess of that are deducted from their benefits. Oxfam says the income support should instead be put in a bank account that workers can use if they decide to opt out of the benefits system.

'This would motivate them to be self-reliant,' Oxfam advocacy officer Wong Shek-hung said.

The study - said to show that the wage floor is having a positive effect on the economy as well as workers' pay - was conducted by Oxfam and research organisation Policy 21 from March last year to January. Researchers interviewed about 500 low-income workers, defined as those with household incomes half or less than the median income of other households the same size.

The average hourly wage of the interviewees grew from HK$20.90 to HK$29.10, and some 70 per cent said their incomes had increased. Others were unchanged or decreased for reasons such as fewer working hours or more unpaid breaks.

The study also showed that 42 per cent of workers receiving Comprehensive Social Security Allowance intended to withdraw from the welfare scheme as they could earn more after the introduction of the wage floor last May. This compared with just 22 per cent in March last year.

Polytechnic University social scientist Dr Chung Kim-wah said the findings showed that the minimum wage had created a positive effect on the economy as well as low-income groups. 'When there were threats that there would be massive layoffs, it didn't happen,' he said.

However, Wong said the CSSA mechanism deterred recipients from quitting the welfare system. She also said the wage level must be increased to motivate CSSA recipients to stop relying on the social security net.

$2,500

The amount in Hong Kong dollars that workers on income support are allowed to earn each month before their benefits are reduced